Failure to Deal with the Issues: The e-Borders Award and ‘Serious Irregularity’ under the Arbitration Act 1996

Abstract

Raytheon is a renowned American defence contractor of epic proportions. It is the world’s largest producer of guided missiles and also concentrates on manufacturing military and commercial electronics. The jurisprudence analysed in this article arose out of the e-Borders contract between the UK Home Office and Raytheon. Signed in 2007, the agreement was worth around £750 million in total. The government terminated it in 2010 because of delays and key milestones being missed. Raytheon had been in breach contract since 2009 and, at that time, lengthy negotiations resulted in a cul-de-sac. By then the project had cost the taxpayer £259.3 million including £195 million in supplier costs. Arbitration proceedings ensuing the termination resulted in the arbitrators finding in Raytheon’s favour. Despite successfully challenging the award in court in the cases discussed in this article – reported as Raytheon Systems Ltd [2014] EWHC 4375 (TCC) and Raytheon Systems Ltd [2015] EWHC 311 (TCC) – the government continued to negotiate and Mrs. Theresa May (the Home Secretary) announced on 27 March 2015 that the settlement with Raytheon was “a full and final payment of £150m.” According to her, Raytheon continues to be a valued supplier to the British Government on key defence and commercial pursuits. Under section 68 of the Arbitration Act 1996 Act, an award can be challenged on numerous (nine) grounds of “serious irregularity”. Where one or more of the grounds are engaged, an additional threshold has to be met and the applicant needs to demonstrate that the irregularity has caused or will cause “substantial injustice”. Although it can be criticised for being ambiguous, on identical factual and legal issues, about the parties’ ability to seek their costs in the first arbitration proceedings in a subsequent arbitration, Mr. Justice Akenhead’s approach nonetheless adds to the learning on section 68(2)(d) – a provision, regarding failure by the tribunal to deal with the issues, on which scant authority exists. Against that contextual backdrop, despite the settlement, the court’s analysis was valuable because it sent a clear signal to arbitral tribunals to provide consideration to all the issues, and not simply cherry pick the issues they fancy. Similarly, these rulings also shed much needed light on the evidential tests a party will need to meet in mounting a successful challenge to have an arbitration award set aside. Moreover, Professor William Park’s dénouement that the 1996 Act “succeeds admirably in balancing the rival aspirations of finality and fairness in arbitration” is arguably fortified by these judgments. Notably, despite the above problems with e-Borders, in April 2015, the UK introduced passport exit checks on all travelers leaving by commercial air, sea and rail transport. The scheme, which relies on commercial agents (such as staff in airlines, rail and ferry operators) relaying passenger data to the Home Office, shall be fully functional by June 2015.

Keywords: Arbitration Act 1996, e-Borders, Citizens’ Directive, Costs, Contract, Counter-Terrorism, Home Office, Immigration, Raytheon, Serious Irregularity, Substantial Injustice, Technology and Construction Court (TCC), Exit Checks